Gold edged down in volatile trade on Wednesday after early buying by speculators subsided but strong oil prices and tensions in northern Iraq underpinned sentiment. Spot gold rose as high as $764.60 an ounce before dipping to $756.40/757.00 an ounce, down from $758.10/758.90 late in New York on Tuesday, when it rallied to its highest since January 1980 at $766.60.
"I would suspect that in the near term, it would be quite possible for gold to go back above $765 an ounce, and maybe start to approach $770 an ounce," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.
"In the longer run, I think gold prices are probably overdone at current levels and may fall back. But for the time being, I wouldn't rule out a further move higher in the gold price," he said. Dealers noted sales of scrap from jewellers and other holders who cashed in on the metal's rise to multi-year highs.
"We see some scrap gold coming in but other than that, it's quiet," said Beh Hsia Wah, a dealer at United Overseas Bank in Singapore, a centre for bullion trading in Southeast Asia.
"It's mainly from Indonesia and also locals," she said. Benchmark gold futures for August delivery on the Tokyo Commodity Exchange ended 51 yen per gram lower at 2,856 yen. The contract ended on Tuesday at the day's peak of 2,907 yen a gram, the highest since October 1984.
Most active platinum futures fell by their daily 100-yen limit to 5,169 yen per gram as a firm yen triggered selling from speculators, who had pushed up the price to record highs this week.
US crude futures retreated on Wednesday after topping $88 a barrel to a record high the previous day on concerns over tight inventories in consumer nations and tensions in the oil-producing area.
On Wednesday, Turkey is expected to defy international pressure and grant its troops permission to enter northern Iraq to crush Kurdish rebels based there, though it has played down expectations of any imminent attack.
NYMEX crude for November delivery fell 61 cents a barrel to $87 in Globex electronic trading but dealers said supply concerns and mounting tensions in the Middle East still offered support.
Gold was also well supported, one dealer said. "If we don't breach $755 on the downside, we might see the price moving to $790. I think the range for the month should be between $755 to $790. I am not too sure about $800 yet.
It may happen early next year," he said. Gold is often preferred as a safe haven in times of crisis, and firm energy prices also raise the metal's role as a hedge against inflation.
Gold spiked to a record high of $850 in January 1980 when investors bought the metal heavily on high inflation linked to strong oil prices, Soviet intervention in Afghanistan and the impact of the Iranian revolution. COMEX gold futures gave up early gains in Asia. The most active December contract fell $0.1 an ounce to $761.9 after trading as high as $769.8.
In currencies, the dollar fell to 116.35 yen while the euro inched up to $1.4175. Currency moves were limited due to caution ahead of Friday's meeting in Washington of finance ministers and central bank governors from the Group of Seven industrialised nations.
Platinum fell to $1,407.50/1,412.50 an ounce from $1,410/1,415 in late New York. It hit a record high of $1,428 on Monday. Palladium edged up to $367/372 an ounce from $365/370 in New York. Silver fell to $13.51/13.56 an ounce from $13.57/13.62.
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